The European Central Bank (ECB), the Bank of England, the U.S. Federal Reserve, the Bank of Canada, the Bank of Japan, along with the central banks of Sweden and Switzerland, in collaboration with the Bank for International Settlements have prepared a special report. It outlines the fundamental principles and key characteristics of central bank digital currencies (CBDCs).
The report does not contain assessments of the feasibility of issuing CBDCs or mentions of such intentions.
“Central banks will decide after consulting governments and stakeholders,” the document explains.
The report mentions three fundamental principles of CBDCs and the associated infrastructure:
- The central bank must not put monetary or financial stability at risk;
- National digital currency should coexist with and complement existing forms of money;
- CBDC should promote innovation and efficiency.
The document lays out the key components of national digital currencies. They include convertibility, convenience, security, speed, scalability, and legal robustness.
In October, the People’s Bank of China will conduct the first distribution of the digital yuan among the population. The PRC intends to outpace other countries and be the first to issue a CBDC, including to push the dollar off the world stage.
China’s successes have intensified the ECB’s efforts to roll out a digital euro. The Fed has expanded its CBDC research, and the Bank of Japan has established a working group to study central bank digital currencies.
How and why central banks are creating digital currencies (CBDC)
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